SEC FORM 4

SEC Form 4

FORM 4

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934
or Section 30(h) of the Investment Company Act of 1940

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Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

1. Name and Address of Reporting Person^*

PENNEY GEOFFREY J

(Last)

(First)

(Middle)

C/O KEYNOTE SYSTEMS

777 MARINERS ISLAND BLVD.

(Street)

SAN MATEO

94404

(City)

(State)

(Zip)

2. Issuer Name and Ticker or Trading Symbol
KEYNOTE SYSTEMS INC [ KEYN ]

5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)

X	Director	10% Owner
	Officer (give title below)	Other (specify below)

3. Date of Earliest Transaction (Month/Day/Year)
03/09/2007

4. If Amendment, Date of Original Filed (Month/Day/Year)

6. Individual or Joint/Group Filing (Check Applicable Line)

X	Form filed by One Reporting Person
	Form filed by More than One Reporting Person

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	3. Transaction Code (Instr. 8)		4. Securities Acquired (A) or Disposed Of (D) (Instr. 3, 4 and 5)			5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4)	6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	Amount	(A) or (D)	Price		6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
Common Stock	03/09/2007	03/09/2007	M		5,500	A	$11.98	5,500	D
Common Stock	03/09/2007	03/09/2007	S		5,500	D	$12.9821	0	D

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned (e.g., puts, calls, warrants, options, convertible securities)
1. Title of Derivative Security (Instr. 3)	2. Conversion or Exercise Price of Derivative Security	3. Transaction Date (Month/Day/Year)	3A. Deemed Execution Date, if any (Month/Day/Year)	4. Transaction Code (Instr. 8)		5. Number of Derivative Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5)		6. Date Exercisable and Expiration Date (Month/Day/Year)		7. Title and Amount of Securities Underlying Derivative Security (Instr. 3 and 4)		8. Price of Derivative Security (Instr. 5)	9. Number of derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4)	10. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	11. Nature of Indirect Beneficial Ownership (Instr. 4)
1. Title of Derivative Security (Instr. 3)	2. Conversion or Exercise Price of Derivative Security	3. Transaction Date (Month/Day/Year)	3A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	(A)	(D)	Date Exercisable	Expiration Date	Title	Amount or Number of Shares	8. Price of Derivative Security (Instr. 5)		10. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	11. Nature of Indirect Beneficial Ownership (Instr. 4)
Non-Employee Option Grant	$11.98	03/09/2007	03/09/2007	M			5,500	03/25/2005⁽¹⁾	07/01/2015	Common Stock	5,500	$0.00	35,000	D
Non-Employee Option Grant	$10.97							03/23/2009⁽²⁾	03/23/2016	Common Stock	0		15,000	D
Non-Employee Option Grant	$12.13							02/02/2007⁽³⁾	02/02/2017	Common Stock	12,000		12,000	D

Explanation of Responses:

1. 25% of shares will be vested on March 23, 2006, the date of the 2006 Annual Meeting of Stockholders and ratably thereafter over the following 36 month period with the options fully vested at the 2009 annual meeting. Vesting accelerates in full upon a change of control of the Company.

2. Vests ratably over a 12-month period commencing on the date of the 2009 Annual Meeting of Shareholders and fully vested on the 2010 Annual Meeting of Shareholders. The issuer has not yet set the date for its 2009 Annual Meeting of Shareholders, so for this filing purpose only, the Date Exercisable assumes that the date of the 2009 Annual Meeting of Shareholders is three years after the date of the 2006 Annual Meeting of Shareholders

3. One third of shares were vested on February 2, 2007. The rest of shares will be vested ratably monthly after February 2, 2007 and fully vested on September 30, 2007.

Remarks:

	/s/ Geoffrey Penny by James Zhan, Attorney-in-Fact	03/13/2007
	** Signature of Reporting Person	Date
Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
* If the form is filed by more than one reporting person, see Instruction 4 (b)(v).
** Intentional misstatements or omissions of facts constitute Federal Criminal Violations See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
Note: File three copies of this Form, one of which must be manually signed. If space is insufficient, see Instruction 6 for procedure.
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